A police source said two attackers had been shot dead Wednesday morning after a prolonged shootout.

"The two have red bandanas tied around their forehead and bullets strapped around their chest with several magazines each," the senior police officer said.

"Each had an AK47 which has been secured."

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Kenya police update hotel attack

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Kenya police update hotel attack

Nairobi is a major expatriate hub, and the compound targeted contained offices of various international companies, in an echo of a deadly 2013 assault on a Nairobi shopping center in the same neighborhood.

“The main door of the hotel was blown open and there was a human arm in the street severed from the shoulder,” said Serge Medic, the Swiss owner of a security company who ran to the scene to help when he heard of the attack from his taxi driver.

Medic, who was armed, entered the building with a policeman and two soldiers, he said, but they came under fire and retreated.

An unexploded grenade lay in the lobby, he said.

“One man said he saw two armed men with scarves on their head and bandoliers of bullets,” Medic told Reuters, as gunfire echoed in the background.

Kenya has often been targeted by al Shabaab, who killed 67 people at the Westgate shopping center in 2013 and nearly 150 students at Garissa university in 2015. Al Shabaab says its attacks are revenge for Kenyan troops stationed inside Somalia, which has been riven by civil war since 1991.

Cars burn at the parking lot during an ongoing gunfire and explosions in Nairobi, Kenya.

AAP

More than six hours after Tuesday’s attack began, many office workers were still holed up inside the complex as officers escorted small groups to safety, some with their hands in their air.

Gunfire and explosions

Kenyan police chief Joseph Boinnet said the attack began around 3pm with an explosion targeting cars outside a bank followed by a detonation from a suicide bomber in the hotel lobby.

As he spoke, a Reuters reporter on the scene reported heavy gunfire, then an explosion shortly afterwards.

CCTV footage showed three attackers dressed in black running across the parking lot at 3.30 pm, shortly followed by a fourth.

At least two of the men were wearing green scarves in the close-up footage. One appeared to be wearing a green belt with grenades in it.

Kenyan police officers take cover during an ongoing gunfire and explosions.

AAP

Two Kenyans in their early 30’s working with governance consultants Adam Smith International were among the dead, a family member said.

Both had young families, she said.

A Spanish national was among the injured, a Spanish diplomat told Reuters.

Uber is giving free rides to those who want to donate blood. Go to the app, under payments use code NBODONATE to get 2 free Uber rides to Avenue, M.P. Shah, Aga Khan & Kenyatta Hospitals. #RiversideAttackpic.twitter.com/fdGIIB2eVy

Simon Crump, an Australian who works for an international firm in the complex, barricaded himself inside a spare room with two other people. They waited there for about two hours for help to arrive, their minds racing.

“You’re hiding under a desk trying to figure out what’s going on, and you just don’t know, as there’s so much misinformation,” he said.

When soldiers finally reached the group, they instructed them to put their phones away and put their hands in the air as they made their way to safety.

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Witness, people running in fear, after Kenya attack

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Witness, people running in fear, after Kenya attack

Shabaab

The attack at DusitD2 is the first in Nairobi since gunmen stormed the city's Westgate shopping mall in 2013, killing at least 67 people. The attack and ensuing siege lasted around four days.

That assault was also claimed by Somalia's Shabaab, who have been fighting to overthrow the internationally backed government in Mogadishu since 2007.

The Westgate attack resulted in many upscale establishments and shopping centres in the capital - including the Dusit - putting up strict security barriers checking vehicles and pedestrians.

The Shabaab targeted Kenya after it sent its army into Somalia in October 2011 to fight the jihadist group.

On April 2, 2015, another Shabaab attack killed 148 people at the university in Garissa, eastern Kenya.

Men and a woman take cover as they escape to safety.

AAP

In its statement, the Shabaab noted the attack came exactly three years after its fighters overran a Kenyan military base in Somalia.

"This attack on Nairobi hotel came as Kenyans and their media are commemorating (the) El Adde attack," it said.

The Shabaab claimed more than 200 soldiers died in that assault, while the government has refused to give its own toll or disclose details of the attack.